UK questions if VI can repay loans
The VI is set to benefit from the recent ruling by the Organisation for Economic Cooperation and Development (OECD) where the UK's Development Aid can be used for short term assistance for middle income countries.
However, as the territory struggles to get back on its feet with an impact of $3.6 billion in losses following hurricane Irma, the Virgin Islands will need millions to begin rebuilding.
Mr Russell-Moyle explained, “When natural disasters or human disasters hit, we have to step in, just like in 1993, when the City of London was bombed by the IRA; we stepped in. Since then, the City of London has paid, through its tax base, back the UK Exchequer many times."
He continued, “With BVI there is a lot of discussion about transparency of tax and openness of shell companies. Is that something that needs to be harnessed to make sure that money is used for the right purpose in the long term, so we know it is paid back?”
$60M in Reserve Fund
In response, the Minister of Finance commented that the VI is part of the international monetary system that works very well in terms of cross-border transactions, providing employment all around the world and is absolutely well regulated.
Not very pleased with the response by the Premier, Mr Lloyd Russell-Moyle questioned again, “I am asking more about how you leverage in the future, in the long term—because in the short term we have a duty to support the islands—so that these funds can be put aside for resilience and climate change, and how you are thinking about that. That is what I am trying to explore: the long-term plans for resilience-building.”
Dr Smith emphasised that the VI has already started to look at long term plans for resilience building, while recalling that seven years ago the VI started having reserve funds towards that kind of purpose.
“That is why we have at this moment over $60 million in that reserve fund. The financial service area will contribute to that fund, and we will continue to develop that, because we realise we need that kind of back-up in case of this kind of disaster,” explained the Minister of Finance to the committee.
Long term assistance needed
Meanwhile, the Premier explained to the committee that the territory needs long term assistance although the VI has received aid from the UK and other countries in the initial stage.
"Now we have to look at the long term, and because of the extent of the damage, we are not able to do that within our budget, so we will have to seek assistance in terms of loans and any other forms of financing we can," the Premier said.
The Member of Parliament pointed out that the VI has a higher Gross Domestic Product (GDP) per capita than Britain, while questioning if the VI is thinking about having reserved funds for climate change and other disasters in the future.
The Premier urged, "Even though we had a relatively high GDP before, right now if we do not get the kind of assistance that is needed to rebuild the economy, we will become a dependency on the United Kingdom, and that is something that we do not want and you do not want."
Dr Smith disclosed that the territory is not accustomed to being dependent on the UK, adding that they have always been able to take care of the territory's needs.
The leader of the territory said that the catastrophic hurricane is not something that the territory ever expected, “So we have to deal with it and we need assistance to deal with it.”
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13 Responses to “UK questions if VI can repay loans”
Absent a similar action plan for the VI by developed countries, the VI will need to borrow a ton of cash for the recovery effort. Assuming that it get some grants and the UK will contribute some resources, how will VI payback the money it borrowed? Will the good faith and credit of government be enough for the lenders? Though the territory is burdened with taxes and fees, a multiple source recovery tax with a sunset clause may need to be imposed, i.e., vehicle registration, property ownership, visitors, employment, sales........etc. Residents should and must demand good stewardship of any recovery tax money. Recovery tax money must be fenced for only the recovery effort. From the key board, I can sense the question of what if next year another Cat 5 hurricane decimate the BVI. Well, this is the reality geographically of the VI location.
Make no mistake that potential investors and offshore companies are reading these online news feeds to get a sense of the overall culture in the BVI.... AND IT AIN'T PLEASANT!
As for implying some shell company facade, all BVI registered companies are required to file registers of directors and ultimate beneficial owners, against whom strict regulatory and compliance reporting procedures apply, also there are strict regulatory regimes and common tax reporting standards which BVI has continued to comply with on an international level, so what the heck is the question on transparency there?
I don't think that Premier understood the debt and significance of the allegations in that Minister's questions. Sounds clueless